What 90 Percent of All Small Business Owners Don't Know About Small Business Insurance!
There are several factors that you should take into account when determining what types of insurance coverage you want: how large or small your small business is, how it's organized (partnership, sole proprietorship, corporation, LLC), the number of employees, how you get paid (commissions, salary, fees), whether your small business is service or product oriented, your exposure to liability and location.
Things that you should consider:
Should you die prematurely, do you have enough life insurance to protect your family? If you have a small service business, your small business is worth Zero when you die. For example, the spouse of a deceased doctor or lawyer can only sell the tools of the trade, not the clients (the true bread and butter of any small service business). If you can predict when you might die, you could sell it ahead of time. Otherwise, all small service business owners should protect their families with a minimum coverage of 7X gross income.
If your goal is to have a member of your family take over your small business at your demise, are they capable (and licensed) to do so?
What happens if you get ill or suffer an injury and can no longer run your small business? Do you have disability insurance? For a stipulated period of time, you will be paid approximately 60% of your income when you have disability insurance. Depending on whether you claimed the premium as a business expense or not, your benefits might be non-taxable.
Even more important is your answer to this question: Do you have "business overhead insurance"? While you're out of commission, who will cover the costs of running your small business like utilities, insurance and salaries? Your small business overhead expenses will not be covered by your disability insurance unless you include it as an add-on.
If you have partners, do you have a Buy-Sell Agreement? Well, if you or your partner should suddenly die, your interest in the business will be protected. Here's a great example of this: your partner dies and his wife wants to claim her share of the business. Do you really want your deceased partner's relatives to take over their share of the business? Wouldn't you simply rather buy out your partner's share of the company? Well, with this additional insurance, you wouldn't have to worry about your partner's family interfering with your small business.
Do you have "disability buy-out coverage"? If your partner was to become severly disabled, you would be presented with several problems without this particular type of insurance. Would you simply keep paying him or her even though you are doing all of the work... possibly for months or even years to come? After a period of time, this type of coverage would force your disabled partner to sell you his share of the business, based on a previously signed equitable agreement.
Of course, many of these situations may not occur, but it's your small business. The final step is to determine what types of insurance coverage you believe you want to protect your small business and then call and speak to a professtional who can set you up.
Ed Brancheau created The Bank of Green to advise small businesses about subjects like small business health insurance and to help individuals build wealth through their home equity.
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